SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 6-K
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
 
For the month of October, 2017
Commission File Number 1-14732
 

 
COMPANHIA SIDERÚRGICA NACIONAL
(Exact name of registrant as specified in its charter)
 
National Steel Company
(Translation of Registrant's name into English)
 
Av. Brigadeiro Faria Lima 3400, 20º andar
São Paulo, SP, Brazil
04538-132
(Address of principal executive office)
 

Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F. 
Form 20-F ___X___ Form 40-F _______

  Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Yes _______ No ___X____


 

COMPANHIA SIDERÚRGICA NACIONAL
Publicly-Held Company
Corporate Taxpayer’s ID (CNPJ/MF): 33.042.730/0001 -04
Company Registry (NIRE): 35-3.0039609.0

MATERIAL FACT

Companhia Siderúrgica Nacional (BOVESPA: CSNA3; NYSE: SID) (“Company”), pursuant to the Material Fact and the Notice to the Market disclosed on March 27, 2017 and May 24, 2017, respectively, hereby informs its shareholders and the market in general that it has disclosed its audited financial statements for the fiscal year ended December 31, 2016 and that it has voluntarily restated the financial statements for the fiscal year ended December 31, 2015.

In addition, as stated in the Material Facts disclosed on May 15, 2017 and August 15, 2017, the conclusion of the above-mentioned works impacted the opening balances of the 2017 financial statements, which is why the Company has not disclosed the quarterly information for 2017 by the regulatory deadlines. As a result, considering the duty to inform and acting with diligence and transparency, the Company has decided to disclose to the market the preliminary unaudited results for the first, second and third quarters of 2017, which are, therefore, subject to independent auditors’ review, pursuant to the applicable legislation.

Said preliminary unaudited information related to fiscal year 2017 is attached to this material fact.

For further information, please contact the Company’s Investor Relati ons Department at (11) 3049-7585 or at invrel@csn.com.br.

São Paulo, October 30, 2017.

DAVID MOISE SALAMA
INVESTOR RELATIONS OFFICER


 

 

 
 

1Q17 Earnings Release

Unaudited

 

Companhia Siderúrgica Nacional (CSN) (BM & FBOVESPA: CSNA3) (NYSE: SID) exceptionally discloses its preliminary and unaudited results for the first quarter of 2017 (1Q17) and is therefore subject to adjustments and modifications by independent auditors review. The information disclosed in Brazilian Reais and prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB); and also in accordance with accounting practices adopted in Brazil and fully convergent with international accounting standards, issued by the Accounting Pronouncements Committee (CPC) and referenced by the Brazilian Securities and Exchange Commission (CVM), pursuant to CVM Instruction 485 of 09/01/2010. The below text encompasses the Company's consolidated results for the first quarter of 2017 (1Q17) and comparisons are for the fourth quarter of 2016 (4Q16) and for the first quarter of 2016 (1Q16) without Metallic, unless otherwise specified. The Real/U.S. Dollar exchange rate was R$3.1684 on March 31, 2017 and R$3.2591 on December 31, 2016.

 

 

The financial information contained herein for the first quarter of 2017 is preliminary and unaudited , and is therefore subject to adjustments and modifications as a result of an independent auditors' review.

 

Operating and Financial Highlights

 

·          EBITDA totaled R$1,333 million , 82% up on 1Q16, accompanied by an EBITDA margin of 28,7%, 11 p.p. higher than in the previous year.

·          Leverage declined by 3.2x, from 8.7x on 1Q16 to 5.5x on 1Q17.

·          Steel EBITDA came to R$610 million , 12% higher on 4Q16, while apparent steel consumption climbed 5.0% according to the Brazilian Steel Institute (IABr).

·          Mining EBITDA reached R$620 million , 21% higher than in 4Q16.

 

           
 Highlights 1Q16 4Q16 1Q17 Change  
1Q17 x 4Q16   1Q17 x 1Q16  
 
Steel Sales (thousand t)   1,248   1,187   1,194   1%   -4%  
- Domestic Market   52%   62%   52%   -10%   0%  
- Overseas Subsidiaries   42%   34%   41%   7%   -1%  
- Exports   6%   4%   8%   4%   2%  
 
Iron Ore Sales (thousand t)1   8,295   9,191   7,243   -21%   -13%  
- Domestic Market   13%   14%   19%   5%   6%  
- Exports   87%   86%   81%   -5%   -6%  
 
Consolidated Results (R$ Million)            
Net Revenue   3,996   4,518   4,411   -2%   10%  
Gross Profit   923   1,348   1,318   -2%   43%  
Adjusted EBITDA   733   1,249   1,332   7%   82%  
 
Adjusted Net Debt   26,654   25,831   25,477   -1%   -4%  
Adjusted Cash Position   6,471   5,761   5,145   -11%   -20%  
Net Debt / Adjusted EBITDA   8,7x   6,3x   5,5x   -0,89 x   -3,22 x  

 

 

¹ Adjusted EBITDA is calculated based on net income/loss, before depreciation and amortization, income taxes, the net financial result, results from investees, and other operating income (expenses) and includes the proportional share of the EBITDA of the jointly-owned investees MRS Logística and CBSI, as well as the Company’s 60% interest in Namisa, 33.27% in MRS and 50% in CBSI until November 2015 and stakes of 100% in Congonhas Minérios, 37.27% in MRS and 50% in CBSI as of December 2015.

 

 

For further information, please visit our website: www.csn.com.br/ri

 

    
 

 
 

 

  1Q17

RESULTS

 

 

² Adjusted Net Debt and Adjusted Cash and Cash Equivalents included 33.27% of the stake in MRS, 60% of the interest in Namisa and 50% of the stake in CBSI until November 2015. As of December 2015, they included 100% of Congonhas Minérios, 32.27% of MRS and 50% of CBSI, excluding Forfaiting and drawee risk operations.

 

 

 

CSN’s Consolidated Results

 

·          Net revenue totaled R$4,412 million in 1Q17, 2% down on 4Q16, due to lower sold volume in the mining segment and despite the price increases and the slight upturn in steel product sales volume compared with the previous quarter.

 

·          COGS came to R$3,093 million in 1Q17, 2% lower than in the previous quarter.

 

·          Gross profit totaled R$1,318 million, 2% down on 4Q16. The gross margin stood at 29.9%, in line with the previous quarter.

 

·          Selling, general and administrative expenses amounted to R$488 million in 1Q17, 17% less than in 4Q16.

 

·          Other operating income (expenses) was an expense of R$99 million in 1Q17, versus negative R$114 million in 4Q16.

 

·          In 1Q17, the net financial result was negative by R$497 million, as a result of financial expenses of R$601 million, which has been partially offset by financial revenue of R$103 million. 

 

Financial Result (R$ million)

1Q16

4Q16

1Q17

Financial Result - IFRS

     (885)

(677)

(497)

Financial Revenue

      243

115

103

Financial Expenses

 (1,128)

(792)

(601)

Financial Expenses (ex-exchange variation)

     (821)

(813)

(787)

Result with Exchange Variation

     (307)

21

186

Monetary and Exchange Variation

      936

5

308

Hedge Accounting

     (554)

17

(135)

Derivative Result

     (689)

(2)

13

 

·          CSN’s equity result was a positive R$21 million in 1Q17, versus a negative R$24 million in 4Q16. This result was chiefly due to the performance of TLSA.

 

Share of Profit (Loss) of Investees (R$ million)

1Q16

4Q16

1Q17

Change

1Q17

x

4Q16

1Q17

x

1Q16

MRS Logística

          61

          20

39

91%

(37%)

CBSI

             1

            1

-

-

-

TLSA

           (7)

        (35)

(4)

(88%)

(39%)

Arvedi Metalfer BR

            -  

-

(1)

-

-

Eliminations

         (11)

          (9)

(13)

45%

26%

Share of Profit (Loss) of Investees

          46

        (24)

21

-

(55%)

 

·           CSN recorded a first-quarter net income of R$118 million, versus loss income of R$56 million in 4Q16. The result in 1Q17 is for the better performance of the financial result, which recorded R$ 497 million, and R$ 677 million in 4Q16, 27% down on the last quarter of 2016.

 

 

 

 

For further information, please visit our website: www.csn.com.br/ri

 2
 
 

 
 

 

  1Q17

RESULTS

 

 

Adjusted EBITDA (R$ million)

1Q16

4Q16

1Q17

Change

1Q17

x

4Q16

1Q17

x

1Q16

Profit (Loss) for the Period

 (777)

(56)

118

-

-

(*) Result of Discontinued Operations

-

3

-

-

-

(-) Depreciation

309

356

390

10%

26%

(+)  Income Tax and Social Contribution

113

2

137

-

21%

(-) Net Financial Result

897

677

497

(27%)

(45%)

EBITDA (CVM Instruction 527)

542

982

1,142

(16%)

111%

(+) Other Operating Income / Expenses

126

 114

99

(13%)

(21%)

(+) Share of Profit (Loss) of Investees

 (46)

24

(21)

-

(54%)

(-) Proportionate EBITDA of Jointly-Owned Subsidiaries

110

129

113

(13%)

3%

Adjusted EBITDA

733

1,249

1,333

7%

82%

¹The Company discloses adjusted EBITDA excluding interests in investments and other operating income (expenses) in the belief that these items should not be considered when calculating recurring operating cash flow.

 

·          Adjusted EBITDA amounted to R$1,333 million in 1Q17, versus R$1,249 million in the previous quarter, accompanied by an adjusted EBITDA margin of 29%, 2.4 p.p. up.

 

 

 

¹The adjusted EBITDA margin is calculated as the ratio between adjusted EBITDA and adjusted net revenue, which considered the stakes of 100% in CSN Mineração, 37.27% in MRS and 50% in CBSI.

 

Debt

 

The adjusted amounts of EBITDA, debt and cash included the stakes of 100% in CSN Mineração, 37.27% in MRS and 50% in CBSI as of December 2015, as well as financial investments used as collateral for exchange operations on the BM&FBovespa. On March 31, 2017, consolidated net debt totaled R$25,477 million, while the net debt/EBITDA ratio, calculated based on LTM adjusted EBITDA, stood at 5.5x.

 

 

For further information, please visit our website: www.csn.com.br/ri

 3

 

 

 
 

 

  1Q17

RESULTS

 

Debt (R$ million) and Net Debt/Adjusted EBITDA (x)

 

 

 

 

Foreign Exchange Exposure

 

The FX exposure of our consolidated balance sheet on March 31, 2017 was US$ 603 million, ex bond as shown in the table below.

 

The hedge accounting adopted by CSN correlates projected export inflows in dollars with part of the scheduled debt payments in the same currency.  Therefore, the exchange variation of the dollar-denominated debt is temporarily booked under shareholders’ equity, being recorded in the income statement when dollar revenues from exports are received.

 

 

 

Foreign Exchange Exposure

IFRS

(US$ million)

12/31/2016

3/31/2017

Cash

            914

              1,091

Accounts Receivable

             373

               331

Total Assets

            1,290

           1,425

Borrowings and Financing

          (4,373)

          (4,327)

Suppliers

             (97)

               (115)

Other Liabilities

                (18)

               (15)

Total Liabilities

          (4,488)

          (4,458)

Foreign Exchange Exposure

          (3,198)

          (3,032)

Notional Amount of Derivatives Contracted, Net

                   -  

            -  

Cash Flow Hedge Accounting

            1,458

           1,429

Net Foreign Exchange Exposure

          (1,740)

          (1,603)

Perpetual Bonds

            1,000

           1,000

Net Foreign Exchange Exposure excluding Perpetual Bonds

             (740)

             (603)

 

 

For further information, please visit our website: www.csn.com.br/ri

 4

 

 
 

 

  1Q17

RESULTS

 

 

Capex

 

CSN invested R$189 million in 1Q17, 58% less of 4Q16.

 

 

Capex (R$ million)

1Q16

4Q16

1Q17

Steel

119

208

92

Mining

62

78

59

Cement

139

135

24

Logistics

10

23

13

Other

-

8

-

Total Capex - IFRS

330

452

189

 

Working Capital

 

The working capital invested in the Company’s business totaled R$3.031 million in 1Q17, R$161 million more than in 4Q16, chiefly due to the R$171 million increase in inventories. On a same comparison basis, the average receivable period down on 2 days, while payment periods and inventory turnover increased by 5 days and 10 days, respectively.

 

To calculate working capital, CSN adjusts its assets and liabilities as demonstrated below:  

·          Accounts Receivable: Excludes Dividends Receivable, Advances to Employees and Other Credits.;

·          Inventories: Includes Estimated Losses and excludes Spare Parts, which are not part of the cash conversion cycle, and will be booked in Fixed Assets when consumed;

·          Recoverable Taxes: Composed only by the Income (IRPJ) and Social Contribution (CSLL) Taxes amount included in Recoverable Taxes;

·          Taxes Payable: Composed by the Current Liabilities account Taxes Payable plus Taxes in Installments;

·          Advance from Clients: Subaccount of Other Liabilities recorded in Current Liabilities;

·          Suppliers: Includes Forfaiting and Drawee Risk (Note 13 to the Quarterly Information - ITR).

 

 

Working Capital (R$ Million)

1Q16

4Q16

1Q17

 

Change

 

1Q17

x

4Q16

1Q17

x

1Q16

Assets

5.573

5.210

5.526

 

316

-47

Accounts Receivable

1.689

1.905

1.849

 

-57

160

Inventories Turnover

3.587

3.251

3.562

 

311

-24

Advances to Taxes

298

54

115

 

60

-183

Liabilities

2.266

2.340

2.495

 

155

229

Suppliers

1.543

1.763

1.934

 

171

392

Salaries and Social Contribution

244

254

252

 

-2

8

Taxes Payable

412

232

190

 

-41

-222

Advances from Clients

67

91

119

 

28

52

Working Capital

3.307

2.870

3.031

 

161

-276

 

 

 

 

 

 

 

 

 

 

 

Turnover Ratio (days)

1Q16

4Q16

1Q17

 

Change

 

1Q17

x

4Q16

1Q17

x

1Q16

Receivables

33

35

33

 

-2

0

Supplier Payment

46

51

56

 

5

10

Investory Turnover

106

94

104

 

10

-2

Cash Conversion Cycle

93

78

81

 

3

-12

 

 

 

For further information, please visit our website: www.csn.com.br/ri

5

 


 

 
 
 

  1Q17

RESULTS

 

Results by Segment

 

The Company maintains integrated operations in five business segments: Steel, Mining, Logistics, Cement and Energy.  The main assets and/or companies comprising each segment are presented below:

 

 

For further information, please visit our website: www.csn.com.br/ri

6

 

 

 
 

 

  1Q17

RESULTS

 

 

Adjusted EBITDA by Segment – 1Q17 (R$ million)

 

 

 

1Q17 Result

Steel

 

Mining

 

Port Logistics 

 

 Railway Logistics

 

Cement

 

Energy

 

 Corporate Expenses/Elimination

 

 Consolidated

 (R$ million)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenue

3,071

 

1,174

 

55

 

323

 

126

 

90

 

(428)

 

4,412

Domestic Market

1,789

 

190

 

55

 

323

 

126

 

90

 

(584)

 

1,990

Exports

1,283

 

984

 

-

 

-

 

-

 

-

 

156

 

2,422

Cost of Goods and Services Sold

(2,395)

 

(636)

 

(37)

 

(280)

 

(130)

 

(69)

 

454

 

(3,093)

Gross Profit

677

 

538

 

18

 

43

 

(4)

 

21

 

25

 

1,318

S&A expenses

(235)

 

(40)

 

(7)

 

(24)

 

(19)

 

(7)

 

(156)

 

(488)

Depreciation

169

 

123

 

3

 

104

 

35

 

4

 

(48)

 

390

Proportionate EBITDA of Jointly-Owned Subsidiaries

-

 

-

 

-

 

-

 

-

 

-

 

113

 

113

Adjusted EBITDA

610

 

620

 

14

 

123

 

12

 

19

 

(65)

 

1,333

 

4Q16 Result

Steel

 

Mining

 

Port Logistics

 

 Railway Logistics

 

Cement

 

Energy

 

 Corporate Expenses/Elimination

 

 Consolidated

 (R$ million)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenue

2,962

 

1,317

 

62

 

                324

 

128

 

67

 

              (341)

 

4,519

Domestic Market

1,979

 

              168

 

62

 

                324

 

128

 

67

 

              (570)

 

2,159

Exports

982

 

          1,149

 

-  

 

                  -  

 

-  

 

-  

 

                228

 

2,359

Cost of Goods and Services Sold

 (2,334)

 

 (797)

 

 (34)

 

              (237)

 

 (133)

 

 (48)

 

                413

 

(3,170)

Gross Profit

628

 

              521

 

28

 

                  87

 

 (5)

 

19

 

                  72

 

1,349

S&A expenses

 (262)

 

 (133)

 

 (6)

 

                  (9)

 

 (20)

 

 (7)

 

              (148)

 

(585)

Depreciation

179

 

              124

 

3

 

                  58

 

28

 

4

 

                (41)

 

356

Proportionate EBITDA of Jointly-Owned Subsidiaries

-  

 

                 -  

 

-  

 

                  -  

 

-  

 

-  

 

                129

 

129

Adjusted EBITDA

545

 

              511

 

26

 

                137

 

2

 

17

 

                  12

 

1,249

 

Steel

According to the World Steel Association (WSA), global crude steel production totaled 410 billion tonnes in the first quarter of 2017, 5.7% more than in 1Q16. According to the Brazilian Steel Institute (IABr), domestic crude steel production came to 8.2 million tonnes, 10.9% up. Domestic flat rolled steel production totaled 5.4 million tonnes, 6.9% up on 1Q16, while apparent consumption moved up by 5.0%, to 4.6 million tonnes, with domestic sales of 4.0 million tonnes and imports of 637,000 tonnes. Exports totaled 3.8 million tonnes, 17.4% more than in the same period last

 

For further information, please visit our website: www.csn.com.br/ri

7

 

 
 

 

  1Q17

RESULTS

 

 

year. According to the Brazilian Steel Distributors’ Association (INDA), 1Q17 steel purchases sales remain flat, while sales fell 8.7%, totaling 759,600 tonnes and 708,600 tonnes, respectively.  Inventories stood at 951,500 tonnes at the close of 1Q17, 3.6% more than in the previous quarter while inventory turnover fell to 3.7 months.

 

Automotive

 

According to the Auto Manufacturers’ Association (ANFAVEA), vehicle production totaled 610 million units in 1Q17, 24% up on 1Q16. In the same period, new car, light commercial vehicle, truck and bus licensing fell by 1.9% to 472,000 units.  The association expects an increase of 4.0% in vehicle licensing in 2017, with the sale of 2.13 million units and production of 2.41 million units, 11.9% more than in 2016.

 

Construction

 

According to the Construction Material Manufacturers’ Association (ABRAMAT), sales of building materials fell 6.3% between 1Q16 and 1Q17.

 

Home Appliances

 

According to the Brazilian Institute of Geography and Statistics (IBGE), home appliance production increased 4.5% in the first quarter over the same period last year.

 

Results from CSN’s Steel Operation

 

·            Total sales came to 1,194,000 tonnes in 1Q17, 1% up quarter-on-quarter, broken down as follows: 52% from the domestic market, 40% from our subsidiaries abroad and 8% from exports.

 

·           In 1Q17, CSN’s domestic steel sales came to 617,000 tonnes, 16% less than in 4Q16. Of this total, 566,000 tonnes corresponded to flat steel and 51,000 tonnes to long steel.

 

·          First-quarter export sales amounted to 577,000 tonnes, 28% up on the 4Q16 figure. Of this total, direct exports reached 92,000 tonnes, the overseas subsidiaries sold 485,000 tonnes, 157,000 LLC, 228,000 by SWT and 100,000 by Lusosider. 

 

·           In the first quarter, CSN maintained its high share of coated products as a percentage of total sales volume, following the strategy of adding more value to its product mix. Sales of coated products such as galvanized items and tin plate accounted for 59% of flat steel sales, 1.4% up on 4Q16, including all the markets where the Company operates. The export market was one of the quarter's highlights, with the share of coated products remaining high, at 87% in 1Q17.

 

·          Net revenue totaled R$3,071 million in 1Q17, 4% up on 4T16, mostly due to higher steel sales volume and the price increase observed this quarter. In the first quarter, average net revenue per tonne stood at R$2,522, 3% higher than in 4Q16. 

 

 

 

For further information, please visit our website: www.csn.com.br/ri

8

 

 

 
 

 

  1Q17

RESULTS

 

 

·          COGS moved up by 3% over the previous quarter, to R$2,395 million.

 

·           Company’s production cost amounted to R$1,865 million in 1Q17, 4% more than in 4Q16, particularly due to the increase in coal prices.

 

·           The slab production cost reached R$1,367/t, 16% up on 4Q16.

 

·          Adjusted EBITDA totaled R$610 million in the first quarter, increasing by 12% over the R$545 million posted in 4Q16. The adjusted EBITDA margin increased 1.5 p.p. over the previous quarter, to 19.9%.

 

 

 

Flat Steel Production

1Q16

4Q16

1Q17

Change

(Thousand tonnes)

1Q17

x

4Q16

1Q17

x

1Q16

Total Slabs (UPV + Third Parties)

836

1.058

999

(6%)

20%

Crude Steel Production

835

942

982

4%

18%

Third Parties Slabs

1

116

18

-

-

Total Rolled Products

746

952

874

(8%)

17%

Total Long Steel

38

54

53

-

39%

 

 

 

 

Mining

 

Demand for steel in China remained high, influenced by heavy investments in infrastructure and the strong construction activity in the first quarter. Given this scenario, rising steel prices pushed up iron ore prices, which came to more than US$95.00/dmt in February and averaged US$85.64/dmt (Platts, Fe62%, N. China) at the end of 1Q17, 21% up quarter-on-quarter.

 

For further information, please visit our website: www.csn.com.br/ri

9

 

 
 

 

  1Q17

RESULTS

 

 

In the first quarter, maritime freight was positively impacted by theupturn in crude prices and, consequently, in ship fuel.  As a result, Route BCI-C3 (Tubarão-Qingdao) averaged US$13.03/t, 10% up on 4Q16.

 

Results from CSN’s Mining Operation

 

·          CSN’s first-quarter iron ore production totaled 7.8 million tonnes, in line with the 4Q16 figure.

 

·          Iron ore sales amounted to 7.2 million tonnes in 1Q17, 21% down on 4Q16.  CSN Mineração sold 1.3 million tonnes of iron ore to the President Vargas Plant (UPV).

 

 

Production Volume and Mining Sales

1Q16

4Q16

1Q17

Change

(thousand t)

1Q17

x

4Q16

1Q17

x

1Q16

Iron Ore Production¹

7.326

7.758

7.858

1%

 

7%

Third Parties Purchase

617

609

137

(78%)

 

(78%)

Total Production + Purchase

7.943

8.367

7.995

(4%)

 

1%

                     

UPV Sale

1.047

1.264

1.347

7%

 

29%

 Third Parties Sales Volume

7.248

7.927

5.897

(26%)

 

(19%)

Total Sales

8.295

9.191

7.244

(21%)

 

(13%)

¹ Production and sales volumes included the stakes of 100% in NAMISA until November 2015 and 100% in Congonhas in December 2015.

2 As of December 2015, Congonhas Minérios began selling iron ore to CSN’s President Vargas Plant (UPV).

 

·          Net revenue from mining operations totaled R$1,174 million in 1Q17, 11% down on 4Q16 due to the lower sales volume. CRF+FOB unit revenue stood at US$53/t in 4Q16 , 20% up on the previous quarter, while the iron ore price index (Platts, 62% Fe, N. China) rose 21% in the same period.

 

·        In the first quarter, mining COGS totaled R$636 million, 20% less than in 4Q16, influenced by lower sales volume.

 

·      Adjusted EBITDA amounted to R$620 million in 1Q17, 20% higher than in 4Q16, accompanied by an adjusted EBITDA margin of 52.8%, 14.0 p.p. up, chiefly due to the reduction in total sales volume.  

 

CSN Mineração’s Iron Ore Price

(CFR + FOB* - US$/wmt delivered to China)

 

 

The table above shows the breakdown of CSN's price of modality, CFR+FOB, by quarter, as of 2Q16.

 

Logistics

Railway Logistics : first-quarter net revenue totaled R$323 million, generating EBITDA of R$123 million and an EBITDA margin of 38%.

 

 

For further information, please visit our website: www.csn.com.br/ri

10

 

 

 
 
 

  1Q17

RESULTS

 

Port Logistics : in the first quarter, Sepetiba Tecon handled 275,000 tonnes of steel products, in addition to 5,000 tonnes of general cargo and approximately 30,000 containers. First-quarter net revenue came to R$55 million, accompanied by EBITDA of R$14 million and an EBITDA margin of 26%.

                                   

 

Sepetiba TECON Highlights

1Q16

4Q16

1Q17

Change

1Q17

x

4Q16

1Q17

x

1Q16

Container Volume (thousand units)

39

35

30

(15%)

(23%)

 Steel Product Volume (thousand t)

143

338

275

(19%)

92%

 General Cargo Volume (thousand t)

12

7

5

(27%)

(58%)

 

 

 

Cement

 

According to IBGE’s Monthly Survey of Industry (PIM-PF), Brazil’s cement production in the last twelve months recorded year-on-year reduction of 9.3%, in line with the civil construction segment’s performance.

 

Preliminary figures from the Cement Industry Association (SNIC) indicate local cement sales of 13 million tonnes in 1Q17, 8.2% less than in the previous year.  The SNIC expects 2017 cement sales to fall by between 5% and 7% over 2016.

 

Results from CSN’s Cement Operation

 

In 1Q17, cement sales amounted to 821,000 tonnes, 3% more than in 4Q16, while net revenue came to R$126 million.  EBITDA totaled R$12 million, with an EBITDA margin o f 10%. 

 

Cement Highlights

1Q16

4Q16

1Q17

Change

(thousand t)

1Q17

x

4Q16

1Q17

x

1Q16

Total Production

580

801

817

2%

41%

Total Sales

571

799

821

3%

44%

 

Energy

 

According to the Energy Research Company (EPE), Brazilian electricity consumption until March 2017 recorded a year-on-year increase of 2.0%, to 118GWh.  Consumption in the industrial and commercial segments grew by 1.1% and 0.5%, respectively, while the residential segment registered a 3.2% increase.

 

Results from CSN’s Energy Operation

 

In 1Q17, net revenue from energy operations totaled R$90 million, EBITDA stood at R$19 million and the EBITDA margin was 21%.

 

For further information, please visit our website: www.csn.com.br/ri

11
 

 
 

 

  1Q17

RESULTS

 
 
Capital Market

 

CSN’s shares appreciated by 6% in 1Q17, while the Ibovespa increased by 7% in the same period. Daily traded volume on the BM&FBovespa averaged R$51.8 million. On the New York Stock Exchange (NYSE), CSN’s American Depositary Receipts (ADRs) appreciated by 15%, versus the Dow Jones’ 1% upturn. On the NYSE, daily traded volume of CSN’s ADRs averaged US$8.3 million.

 

 

1Q17

Number of shares in thousand

1,387,524

Market Cap

 

Closing price (R$/share)

                   11.47

Closing price (US$/ADR)

                     3.70

Market Capitalization (R$ million)

15,915

Market Capitalization (US$ million)

                   5,134

Total return including dividends and interest on equity

 

CSNA3

6%

SID

15%

Ibovespa

7%

Dow Jones

1%

Volume

 

Daily Average (thousand shares)

4,555

Daily Average (R$ thousand)

51,755

Daily Average (thousand ADRs)

2,302

Daily Average (US$ thousand)

8,346

Source: Bloomberg

 
 
 

Webcast – 1Q17 Earnings Presentation

Investor Relations Team

Conference Call in Portuguese with Simultaneous Translation into English

October 31, 2017 – Tuesday

12:30 p.m. (US EDT)

02:30 p.m. (Brasília time)

Phone: +1 (516) 300-1066

Code: CSN

Replay phone: +55 (11) 3127-4999

Replay code: 42709759

Conference ID: CSN

Webcast: www.csn.com.br/ri

 

  Diretor Executivo David Salama

 Leo Shinohara ( leonardo.shinohara@csn.com.br )

 Jose Henrique Triques ( jose.triques@csn.com.br )

 Carla Fernandes ( carla.fernandes@csn.com.br )

 Bruno Souza ( bruno.souza@csn.com.br )

 

 

 

 

Certain of the statements contained herein are forward-looking statements, which express or imply results, performance or events that are expected in the future. These include future results that may be implied by historical results and the statements under ‘Outlook’.  Actual results, performance or events may differ materially from those expressed or implied by the forward-looking statements as a result of several factors, such as the general and economic conditions in Brazil and other countries, interest rate and exchange rate levels, protectionist measures in the U.S., Brazil and other countries, changes in laws and regulations and general competitive factors (on a global, regional or national basis) .

 

 

 

For further information, please visit our website: www.csn.com.br/ri

12

 

 

 
 

 

  1Q17

RESULTS

 
       
CONSOLIDATED – Corporate Law (In thousand of R$)
  1Q16   4Q16   1Q17  
Net Revenues   3.997.286   4.518.596   4.411.596  
Domestic Market   1.701.293   2.159.265   1.989.552  
Foreign Market   2.295.993   2.359.331   2.422.044  
Cost of Goods Sold (COGS)   (3.073.661)   (3.169.630)   (3.093.474)  
COGS, excluding depreciation   (2.770.932)   (2.833.972)   (2.711.868)  
Depreciation allocated to COGS   (302.729)   (335.658)   (381.606)  
Gross Profit   923.625   1.348.966   1.318.122  
Gross Margin (%)   23%   30%   30%  
Selling Expenses   (447.175)   (446.470)   (367.575)  
General and Administrative Expenses   (156.408)   (118.400)   (112.398)  
Depreciation allocated to SG&A   (5.866)   (20.173)   (8.278)  
Other operation income (expense), net   (138.823)   (114.226)   (99.189)  
Share of profits (losses) of investees   45.624   (23.555)   21.105  
Operational Income before Financial Results   220.977   626.142   751.787  
Net Financial Results   (884.599)   (677.171)   (497.224)  
Income before social contribution and income taxes   (663.622)   (51.029)   254.563  
Income Tax and Social Contribution   (113.408)   (1.929)   (136.948)  
Discontinued Operations, Net   333   (2.775)    
Profit/(Loss) for the period   (776.697)   (55.733)   117.615  

 

For further information, please visit our website: www.csn.com.br/ri

13

 


 
 

 

  1Q17

RESULTS

 

 

BALANCE SHEET

Company Corporate Law (In Thousand of R$)

 

Consolidated

 

 12/31/2016

Unaudited
03/31/2017

 Current assets

             12,444,918

             12,137,360

Cash and cash equivalents

               5,631,553

               5,050,484

Trade receivables

               1,997,216

               1,919,176

Inventories

               3,964,136

               4,259,964

Other current assets

                  852,013

                  907,736

 Non-current assets

             31,708,705

             31,628,900

Long-term receivables

               1,745,971

               1,791,202

Investments measured at amortized cost

               4,568,451

               4,652,783

Property, plant and equipment

             18,135,879

             17,921,071

Intangible assets

               7,258,404

               7,263,844

 Total assets

             44,153,623

             43,766,260

 Current liabilities

               5,496,683

               5,396,048

Payroll and related taxes

                  253,837

                  251,521

Suppliers

               1,763,206

               1,934,358

Taxes payable

                  231,861

                  177,488

Borrowings and financing

               2,117,448

               1,837,999

Other payables

               1,021,724

               1,094,087

Provision for tax, social security, labor and civil risks

                  108,607

                  100,595

 Non-current liabilities

             31,272,419

             30,700,275

Borrowings and financing

             28,323,570

             27,688,594

Deferred Income Tax and Social Contribution

               1,046,897

               1,084,701

Other payables

                  131,137

                  128,301

Provision for tax, social security, labor and civil risks

                  704,485

                  729,831

Other provisions

               1,066,330

               1,068,848

 Shareholders’ equity

               7,384,521

               7,669,937

Paid-in capital

               4,540,000

               4,540,000

Capital reserves

                             30

                             30

Acumulated Losses

             (1,301,961)

             (1,216,331)

Statutory reserve

               2,956,459

               3,124,251

Non-controlling interests

               1,189,993

               1,221,987

 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

             44,153,623

             43,766,260

 

 

For further information, please visit our website: www.csn.com.br/ri

14
 

 
 

 

  1Q17

RESULTS

 

 

CASH FLOW STATEMENT

CONSOLIDATED - Corporate Law (In Thousand of R$)

 

4Q16

Unaudited        1Q17                   

 Net cash generated by operating activities

                 501,798

                 (104,517)

 (Net Losses) / Net income attributable to controlling shareholders

                  (82,164)

                     85,630

 Loss for the period attributable to non-controlling interests

                   26,431

                     31,985

 Charges on borrowings and financing

                 698,075

                  670,722

 Depreciation, depletion and amortization

                 365,782

                  401,276

 Share of profits (losses) of investees

                   23,555

                   (21,105)

 Deferred income tax and social contribution

                  (73,048)

                     22,793

 Foreign exchange and monetary variations, net

                 102,301

                 (285,399)

 Result from derivative financial instruments

                    (5,829)

                                 

 Write off fixed assets and intangible

                   26,548

                       9,834

 Accrued actuarial liability

                  (18,803)

                                 

 Gain with business combination

                  (38,483)

                                 

 Gain on divestiture from assets

               (252,023)

                                 

 Environmental liabilities and Deactvation Provisions

                   18,271

                       2,518

 Impairment Fair Value Transnordestina

                 387,989

 

 Fiscal, Social Security, Labor, Civil and Environmental Provisions

                      2,817

                     10,916

 Working Capital

               (139,630)

                 (103,895)

 Accounts Receivable

                  (85,853)

                     87,436

 Trade Receivables – Related Parties

                    (2,859)

                   (21,349)

 Inventory

               (164,844)

                 (312,169)

 Interest receive - Related Parties

                   27,633

                       1,727

 Judicial Deposits

                   13,354

                   (15,347)

 Suppliers

                 195,354

                  192,477

 Taxes and Contributions

                  (60,711)

                   (59,047)

 Others

                  (61,704)

                     22,377

 Others Payments and Receipts

               (539,991)

                 (929,792)

 Interest Expenses

               (539,991)

                 (929,792)

 Cash Flow from Investment Activities

               (572,077)

                 (153,386)

 Fixed Assets/Intangible

               (452,170)

                 (188,573)

 Derivative transactions

                    (9,394)

                     15,200

 Related parties loans

                  (64,343)

                   (15,188)

 Loans / Receive loans - related parties

                                

                       9,472

 Short-term investment, net of redeemed amount

               (418,707)

                     25,703

 Cash and Cash Equivalent from discontinued operations

                   40,702

                                 

 Net Cash from Divestiture from discontinued operations investments

                 331,835

 

 Cash Flow from Financing Companies

               (128,354)

                 (306,516)

 Borrowings and financing raised, net of transaction costs

                   22,597

                                 

 Borrowing amortizations - principal

               (151,196)

                 (306,516)

 Borrowing costs

                         245

                                 

 Foreign Exchange Variation on Cash and Cash Equivalents

             (21,577)

                 9,053

 Free Cash Flow

           (220,210)

            (555,366)

 

 

For further information, please visit our website: www.csn.com.br/ri

15

 

 

 
 

 

 
 

  1Q17

RESULTS

 

 

 

                     
SALES VOLUME CONSOLIDATED (thousand tonnes)
 
    1Q16   4Q16   1Q17   Change
1Q17   x 4Q16   1Q17   x 1Q16
Flat Steel     611     689     566     (123 )     (45 )  
Slabs     -     -     -     -     -  
Hot Rolled     220     243     215     (29)     (6)  
Cold Rolled     108     137     118     (19)     9  
Galvanized     197     207     157     (50)     (40)  
Tin Plates     85     102     77     (26)     (8)  
Long Steel UPV     38     47     51     4     13  
DOMESTIC MARKET     649     736     617     (119)     (32)  
 
    1Q16     4Q16     1Q17     1Q17   x 4Q16     1Q17   x 1Q16  
Flat Steel     381     270     349     79     (32 )  
Hot Rolled     59     9     20     11     (39)  
Cold Rolled     27     18     24     6     (3)  
Galvanized     265     202     258     56     (7)  
Tin Plates     30     41     48     6     18  
Long Steel (profiles)     216     181     228     47     12  
FOREIGN MARKET     597     451     577     126     (20)  
 
    1Q16     4Q16     1Q17     1Q17   x 4Q16     1Q17   x 1Q16  
Flat Steel     992     959     915     (44 )     (77 )  
Slabs     -     -     -     -     -  
Hot Rolled     280     252     235     (17)     (45)  
Cold Rolled     135     155     141     (14)     6  
Galvanized     462     408     415     7     (47)  
Tin Plates     115     144     124     (20)     9  
Long Steel UPV     38     47     51     4     13  
Long Steel (profiles)     216     181     228     47     12  
TOTAL MARKET     1.246     1.187     1.194     7     (52)  

 

 

For further information, please visit our website: www.csn.com.br/ri

16
 

 
 
 

 

 
 

São Paulo, October 30, 2017

 

2Q17 Earnings Release 

Unaudited

 

Companhia Siderúrgica Nacional (CSN) (BM & FBOVESPA: CSNA3) (NYSE: SID) exceptionally discloses its preliminary and unaudited results for the first quarter of 2017 (1Q17) and is therefore subject to adjustments and modifications by independent auditors review. The information disclosed in Brazilian Reais and prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB); and also in accordance with accounting practices adopted in Brazil and fully convergent with international accounting standards, issued by the Accounting Pronouncements Committee (CPC) and referenced by the Brazilian Securities and Exchange Commission (CVM), pursuant to CVM Instruction 485 of 09/01/2010. The below text encompasses the Company's consolidated results for the second quarter of 2017 (2Q17) and comparisons are for the first quarter of 2017 (1Q17) and for the second quarter of 2016 (2Q16) without Metallic, unless otherwise specified. The Real/U.S. Dollar exchange rate was R$3.3076 on June 30, 2017 and R$3.1684 on March 31, 2017.

 

The financial information contained herein for the second quarter of 2017 is preliminary and unaudited , and is therefore subject to adjustments and modifications as a result of an independent auditors' review.

 

 

 

Operating and Financial Highlights

 

·          EBITDA totaled R$896 million , 5% up on 2Q16, accompanied by an EBITDA margin of 20%.

·          Iron ore sales reached 7,8 million tonnes, 8% higher than in 1Q17 .

·          In 2Q17, CSN’s domestic steel sales came to 652,000 tonnes , 6% higher than in 1Q17.

·          The net debt/EBITDA ratio closed 2Q17 at 5.7x, following a downward path.

 

 

CSN’s Consolidated Results

   

 

    

 
 
 

 

 

 

·          Net revenue totaled R$4,311 million in 2Q17, in line with the steel product sales volume compared with the immediately previous quarter and the slight upturn in shipped volume in the mining segment, but negatively affected by decrease iron prices compared with the previous quarter.

 

·          COGS came to R$3,326 million in 2Q17, 8% higher than in the previous quarter.

 

·          Gross profit totaled R$985 million, 25% down on 1Q17, while the gross margin reached 22.8%, slight fall in net revenue and 8% higher COGS compared with the previous quarter.

 

·          Selling, general and administrative expenses amounted to R$592 million in 2Q17, 21% higher than in 1Q17, especially due to the higher share of iron ore CIF sales in the mix.

 

·          Other operating income (expenses) was a net expense of R$99 million in 2Q17, exactly in line with the previous quarter.

 

·          In 2Q17, the net financial result was negative by R$829 million, as a result of financial expenses of R$912 million. the financial expenses were reduced by the financial revenue of R$84 million, the exchange rate variation was negatively affected in 2Q17.

 

 

 

 

·          CSN’s equity result was a positive R$40 million in 2Q17, versus R$20 million in 1Q17. This result was chiefly due to the improved performance of MRS.

 

Share of Profit (Loss) of Investees (R$ million)

2Q16

1Q17

2Q17

Change

2Q17

x

1Q17

2Q17

x

2Q16

MRS Logística

          32

          39

         54

40%

69%

CBSI

            -  

            0

           1

-

-

TLSA

           (4)

           (4)

         (5)

25%

25%

Arvedi Metalfer BR

            -  

           (1)

           1

-

-

Eliminations

         (10)

        (13)

       (11)

-15%

-10%

Lucro Não Realizado

          (2)

-

-

-

-

Share of Profits (Losses) of Investees

          17

          20

         40

100%

135%

 

·           CSN recorded a second-quarter net loss of R$640 million, versus net income of R$118 million in 1Q17.

 

 

 

For further information, please visit our website: www.csn.com.br/ri

2

 


 
 
 

 

 

 

Adjusted EBITDA (R$ million)

2Q16

1Q17

2Q17

Change

2Q17

x

1Q17

2Q17

x

2Q16

Profit (Loss) for the Period

       46

      118

      (640)

-

-

(-) Depreciation

        303

      390

       356

-9%

17%

(+)  Income Tax and Social Contribution

28

      137

       145            

             6%     

             -           

(-) Net Financial Result

       190

 497

829

67%

-

EBITDA (CVM Instruction 527)

        575

   1,142

        689

-40%

20%

(+) Other Operating Income/Expenses

       179

       99

        99

-

-42%

(+) Share of Profit (Loss) of Investees

       (17)

      (21)

       (40)

-

-

(-) Proportionate EBITDA of Jointly-Owned Subsidiaries

  125

112

       147

30%

18%

Adjusted EBITDA

       855

    1,333

        896

-33%

5%

¹The Company discloses adjusted EBITDA excluding interests in investments and other operating income (expenses) in the belief that these items should not be considered when calculating recurring operating cash flow.

 

·          Adjusted EBITDA amounted to R$896 million in 2Q17, accompanied by an adjusted EBITDA margin of 20.8%, in line with 2Q16.

 

 

 

 

 

 

¹The adjusted EBITDA margin is calculated as the ratio between adjusted EBITDA and adjusted net revenue, considering the stakes of 100% in Congonhas Minérios, 37.27% in MRS and 50% in CBSI.

 

 

Debt

 

On June 30, 2017, consolidated net debt totaled R$26,754 million, while the net debt/EBITDA ratio, calculated based on LTM adjusted EBITDA, stood at 5.7x.

 

 

 

 

For further information, please visit our website: www.csn.com.br/ri

3

 

 

 
 
 

 

 
 

 

 

 

 

 

 

 

Foreign Exchange Exposure

 

The net FX exposure of our consolidated balance sheet excluding Perpetual Bond on June 30, 2017 was US$689 million, as shown in the table below.

 

The hedge accounting adopted by CSN correlates projected export inflows in dollars with part of the scheduled debt payments in the same currency. Therefore, the exchange variation of the dollar-denominated debt is temporarily booked under shareholders’ equity, being recorded in the income statement when dollar revenues from exports are received.

 

 

Foreign Exchange Exposure

IFRS

(US$ million)

3/31/2017

6/30/2017

Cash

            1,091

               890

Accounts Receivable

               335

               406

Total Assets

            1,426

           1,296

Borrowings and Financing

          (4,327)

          (4,324)

Suppliers

             (115)

               (70)

Other Liabilities

                (15)

               (13)

Total Liabilities

          (4,458)

          (4,407)

Foreign Exchange Exposure

          (3,032)

          (3,110)

Notional Amount of Derivatives Contracted, Net

                   -  

            -  

Cash Flow Hedge Accounting

            1,429

           1,421

Net Foreign Exchange Exposure

          (1,603)

          (1,689)

Perpetual Bonds

            1,000

           1,000

Net Foreign Exchange Exposure excluding Perpetual Bonds

             (603)

             (689)

 

Capex

 

CSN invested R$239 million in 2Q17.

 

 

For further information, please visit our website: www.csn.com.br/ri

4

 

 

 
 
 

 

 

 

 

Capex (R$ million)

2Q16

1Q17

2Q17

Steel

132

92

102

Mining

61

59

106

Cement

261

24

20

Logistics

13

13

11

Other

0

0

0

 Total Capex - IFRS

           467

           188

           239

 

Working Capital

 

As a result, working capital invested in the Company’s business totaled R$3,597 million in 2Q17, R$566 million more than in 1Q17, chiefly due increase in accounts receivable and inventories.

 

To calculate working capital, CSN adjusts its assets and liabilities as demonstrated below:  

·          Accounts Receivable: Excludes Dividends Receivable, Advances to Employees and Other Credits.;

·          Inventories: Includes Estimated Losses and excludes Spare Parts, which are not part of the cash conversion cycle, and will be booked in Fixed Assets when consumed;

·          Recoverable Taxes: Composed only by the Income (IRPJ) and Social Contribution (CSLL) Taxes amount included in Recoverable Taxes;

·          Taxes Payable: Composed by the Current Liabilities account Taxes Payable plus Taxes in Installments;

·          Advance from Clients: Subaccount of Other Liabilities recorded in Current Liabilities;

·          Suppliers: Includes Forfaiting and Drawee Risk.

 

 

 

Results by Segment

 

The Company maintains integrated operations in five business segments: Steel, Mining, Logistics, Cement and Energy. The main assets and/or companies comprising each segment are presented below:

 

For further information, please visit our website: www.csn.com.br/ri

5

 

 
 

 
 
 

 

 

 

 

 

Notes:As of 2013, the Company ceased the proportional consolidation of its jointly-owned subsidiaries Namisa, MRS and CBSI. For the purpose of preparing and presenting the information by business segment, Management opted to maintain the proportional consolidation of its jointly-owned subsidiaries, in line with historical data. In the reconciliation of CSN’s consolidated results, these companies’ results are eliminated in the “Corporate Expenses/Elimination” column.

Since the end of 2015 results, after the combination of CSN’s mining assets (Casa de Pedra, Namisa and Tecar), the consolidated result have included all the information related to this new company.

 

 

 

 

 

 

For further information, please visit our website: www.csn.com.br/ri

6

 

 

 
 
 

 

 
 

 

 

 

 

 

 

 

 


 

 

 

Steel

 

According to the World Steel Association (WSA), global crude steel production totaled 836 million tonnes in the first half of 2017, 4.5% more than in the same period last year. According to the Brazilian Steel Institute – IABr, domestic crude steel production came to 16.7 million tonnes, 12.4% up. Apparent steel consumption grew by 2.8%, to 9.2 million tonnes, with domestic sales of 8.1 million tonnes and imports of 1.2 million tonnes. Exports totaled 7.3 million tonnes, 9.2% more than in the same period last year. According to INDA (the Brazilian Steel Distributors’ Association), first-half steel purchases by distributors declined by 4.1% year-on-year, totaling 1.4 million tonnes. Inventories stood at 955,900 tonnes at the close of 2Q17, 0.7% more than in the previous month, while inventory turnover fell to 4.3 months.

 

 

 

For further information, please visit our website: www.csn.com.br/ri

7

 
 
 

 
 
 

 

 

 

 

Automotive

According to ANFAVEA (the Auto Manufacturers’ Association), vehicle production totaled 1.3 million units in 1H17, 23.3% up on 1H16. In the same period, new light car, commercial vehicle, truck and bus licensing increased by 8.0% to 913,000 units.

 

Construction

According to ABRAMAT (the Construction Material Manufacturers’ Association), sales of building materials fell by 7.1% between 1H16 and 1H17.

Home Appliances

According to IBGE (the Brazilian Institute of Geography and Statistics), home appliance production in the year through June fell by 1.8% over the same period last year.

Results from CSN’s Steel Operation

 

 

·          Total sales came to 1,173,000 tonnes in 2Q17, 2% less than in 1Q17, broken down as follows: 56% from the domestic market, 39% from our subsidiaries abroad and 5% from exports. 

 

 

·           In 2Q17, CSN’s domestic steel sales came to 652,000 tonnes, 6% higher than in 1Q17. Of this total, 592,000 tonnes corresponded to flat steel and 60,000 tonnes to long steel.

 

 

·          Foreign steel sales amounted to 521,000 tonnes in 2Q17, 10% down on the previous three months. Of this total, exports reached 64,000 tonnes, the overseas subsidiaries sold 457,000 tonnes, 157,000 of which by LLC, 205,000 by SWT and 95,000 by Lusosider.

 

 

·           In the second quarter, CSN maintained its high share of coated products as a percentage of total sales volume, following the strategy of adding more value to its product mix. Sales of coated products such as galvanized items and tin plate accounted for 59% of flat steel sales, in line with 1Q17, considering all the markets in which the Company operates. The foreign market was one of the quarter's highlights, with the share of coated products remaining high, at 88% in 2Q17.

 

 

·           Net revenue totaled R$3,055 million in 2Q17, in line with 1Q17. Net average revenue per tonne stood at R$2,536, 1% higher than 1Q17.

 

 

·          COGS moved up by 10% over the previous quarter, to R$2,628 million.

 

 

·            The production cost amounted to R$2,093 million in 2Q17, 12% more than in 1Q17, must highlight the higher production in 2Q17, 9% upturn in the slab production volum. The cost was affected by the higher iron ore, coke and scrab price, besides that, maintenance of the blast furnace #3 and the hot strip mill. The slab production cost came to R$ 1,414/t, 3% higher than 1Q17.

 

 

 

For further information, please visit our website: www.csn.com.br/ri

8

 

 

 

 
 
 

 

 

 

 

 

 

 

Mining

 

After the price surge that enabled less competitive producers to return to the market, iron ore prices fell substantially following increased supply and port inventories. In addition, the monetary tightening by the Chinese government restricted steelmakers’ access to credit, also contributing to the slowdown in Chinese exports. Given this scenario, the commodity’s price averaged US$62.90/dmt (Platts, Fe62%, N. China) in 2Q17, 27% down on the previous quarter.

 

In 2Q17, seaborne freight charges were impacted by increased transoceanic cargo volume, which in turn pushed up vessel rental costs. Maritime freight costs on Route CI-C3 (Tubarão-Qingdao) averaged US$13.56/t in 2Q17, 4% up on 1Q17.

 

Results from CSN’s Mining Operations

 

·          In 2Q17, iron ore production totaled 7.9 million tonnes, in line with 1Q17.

 

For further information, please visit our website: www.csn.com.br/ri

9

 

 

 
 
 

 

 

 

·          Iron ore sales reached 7.8 million tonnes in 2Q17, 8% up on 1Q17, in the quarter, 1.3 million tonnes from CSN Mineração were sold to CSN’s Presidente Vargas Plant.

 

Production Volume and Mining Sales

2Q16

1Q17

2Q17

Change

(thousand t)

2Q17

x

1Q17

 

2Q17

x

2Q16

Iron Ore Production

8.537

7.858

7.948

1%

 

-7%

Third Parties Purchase

1.376

137

167

22%

 

-88%

Total Production + Purchase

9.913

7.995

8.115

1%

 

-18%

UPV Sale

695

1.347

1.307

-3%

 

88%

 Third Parties Sales Volume

8.572

5.897

6.511

10%

 

-24%

Total Sales

9.267

7.244

7.818

8%

 

-16%

 

·         Net revenue from mining operations totaled R$1,067 million, 9% lower than in 1Q17.  CFR+ FOB unit revenue stood at US$49,5/t in 2Q17, 20% less than in the previous quarter, while the iron ore price index ( Platts , 62% Fe, N. China) also fell by 27% in the same period.

 

·         Mining COGS came to R$742 million in 2Q17, 17% lower than in 1Q17.

 

·         Adjusted EBITDA totaled R$408 million in 2Q17, 34% down on 1Q17, with an adjusted EBITDA margin of 38.2%, 14.6p.p. lower than in 1Q17.

 

CSN Mineração’s Iron Ore Price

(CFR + FOB* - US$/wmt delivered to China)

 

 

The table above shows the breakdown of CSN's price of modality, CFR+FOB, by quarter, as of 4Q16.

 

 

Logistics

Railway Logistics: Net revenue stood at R$364 million in 2Q17, generating EBITDA of R$163 million, accompanied by an EBITDA margin of 45%.

 

Port Logistics : Sepetiba Tecon handled 39,000 containers, in addition to 212,000 tonnes of steel products and 1,000 tonnes of general cargo in 2Q17. Net revenue totaled R$52 million, generating EBITDA of R$12 million, accompanied by an EBITDA margin of 23%.

 

 

For further information, please visit our website: www.csn.com.br/ri

10

 

 

 
 

 
 
 

 

 
 

 

 

 

 

 

Cement

 

According to IBGE’s Monthly Survey of Industry (PIM-PF), Brazil’s cement production increased by 2.1% in the first six months of 2017.

 

Preliminary figures from SNIC ( the Cement Industry Association ) indicate domestic cement sales of 26 million tonnes in the first half of 2017, 8.8% less than in the same period the year before.  For 2017 as a whole, SNIC estimates an annual decline of 5% to 9% in sales.

 

Results from CSN’s Cement Operations

 

In 2Q17, cement sales totaled 831,000 tonnes, 1% up on 1Q17, while net revenue amounted to R$114 million.

 

 

 

Energy

 

According to the Energy Research Company (EPE), Brazilian electricity consumption totaled 233 GWh in the first six months of 2017, 0.4% more than in the same period last year. Consumption in the industrial segment remained flat in the period, edging up by a mere 0.1%, while residential consumption climbed by 1.2% and consumption in the commercial segment fell by 0.7%.

 

Results from CSN’s Energy Operations

 

In 2Q17, net revenue from energy operations totaled R$111 million, EBITDA stood at R$39 million and the EBITDA margin was 35%.

 

 

For further information, please visit our website: www.csn.com.br/ri

11

 

 
 

 
 
 

 

 

 

 

Capital Market

CSN’s shares depreciated by 20% in 2Q17, while the IBOVESPA dropped by 4% in the same period. Daily traded volume on the BM&FBovespa averaged R$67.9 million. On the New York Stock Exchange (NYSE), CSN’s American Depositary Receipts (ADRs) fell by 25%, versus the Dow Jones’ 3% appreciation. On the NYSE, daily traded volume of CSN’s ADRs averaged US$5.1 million.

 

 

2Q17

Number of shares in thousands

1,387,524

Market Cap:

 

Closing price (R$/share)

                   7.18

Closing price (US$/ADR)

                     2.15

Market cap (R$ million)

9,962

Market cap (US$ million)

                   2,983

Total return including dividends and interest on equity

 

CSNA3

-20%

SID

-25%

Ibovespa

-4%

Dow Jones

3%

Volume

 

Daily average (thousand shares)

7,173

Daily average (R$ thousand)

67,954

Daily average (thousand ADRs)

2,333

Daily average (US$ thousand)

5,132

Source: Bloomberg

 

 

Webcast – 2Q17 Earnings Presentation                                                Investor Relations Team

Conference Call in Portuguese with Simultaneous Translation into English

October 31, 2017 – Tuesday

12:30 p.m. (US EDT)

02:30 p.m. (Brasília time)

Phone: +1 (516) 300-1066

Code: CSN

Replay phone: +55 (11) 3127-4999

Replay code: 86131824

Conference ID: CSN

Webcast: www.csn.com.br/ri

Executive Officer David Salama

Leo Shinohara ( leonardo.shinohara@csn.com.br )

Jose Triques ( jose.triques@csn.com.br )

Carla Fernandes ( carla.fernandes@csn.com.br )

Bruno Souza ( bruno.souza@csn.com.br )

 

 

 

 

Certain of the statements contained herein are forward-looking statements, which express or imply results, performance or events that are expected in the future. These include future results that may be implied by historical results and the statements under ‘Outlook’. Actual results, performance or events may differ materially from those expressed or implied by the forward-looking statements as a result of several factors, such as the general and economic conditions in Brazil and other countries, interest rate and exchange rate levels, protectionist measures in the U.S., Brazil and other countries, changes in laws and regulations and general competitive factors (on a global, regional or national basis).

 

 

For further information, please visit our website: www.csn.com.br/ri

12

 

 
 

 
 
 

 

 

 

INCOME STATEMENT

CONSOLIDATED – Corporate Law (In thousand of R$)

 

2Q16

Unaudited 1Q17

Unaudited 2Q17

 Net Revenues

            4,163,827

            4,411,596

            4,310,609

 Domestic Market

            1,768,985

            1,989,552

            1,962,864

 Foreign Market

            2,394,842

            2,422,044

            2,347,745

 Cost of Goods Sold (COGS)

           (3,239,694)

           (3,093,474)

           (3,325,893)

 COGS, excluding depreciation

           (2,942,345)

           (2,711,868)

           (2,977,952)

 Depreciation allocated to COGS

              (297,349)

              (381,606)

              (347,941)

 Gross Profit

                924,133

            1,318,122

                984,716

 Gross Margin (%)

22%

30%

23%

 Selling expenses

              (390,976)

              (367,575)

              (477,063)

 General and administrative expenses

              (100,767)

              (112,398)

              (106,801)

 Depreciation allocated to SG&A

                   (5,690)

                   (8,278)

                   (7,829)

 Other operation income (expense), net

              (178,921)

                (99,189)

                (99,025)

 Share of profits (losses) of investees

                  16,732

                  21,105

                  39,393

 Operational Income before Financial Results

                264,511

                751,787

                333,391

 Net Financial Results

              (189,840)

              (497,224)

              (828,619)

 Income before social contribution and income taxes

                  74,671

                254,563

              (495,228)

 Income Tax and Social Contribution

                (28,413)

              (136,948)

              (144,728)

 Continued operations, net

                  46,258

                117,615

              (639,956)

 Discontinued Operations, Net

                      (135)

                           -  

                               

 Profit/(Loss) for the period

                  46,123

                117,615

              (639,956)

 

 

For further information, please visit our website: www.csn.com.br/ri

13

 
 
 

 
 
 

 

 

BALANCE SHEET

Company Corporate Law (In Thousand of R$)

 

Consolidated

 

12/31/2016

Unaudited

06/30/2017

 Current assets

             12,444,918

             12,164,101

Cash and cash equivalents

               5,631,553

               4,328,504

Trade receivables

               1,997,216

               2,417,950

Inventories

               3,964,136

               4,449,326

Other current assets

                  852,013

                  968,321

 Non-current assets

             31,708,705

             31,682,889

Long-term receivables

               1,745,971

               1,764,303

Investments measured at amortized cost

               4,568,451

               4,728,154

Property, plant and equipment

             18,135,879

             17,897,741

Intangible assets

               7,258,404

               7,292,691

 Total assets

             44,153,623

             43,846,990

 Current liabilities

               5,496,683

               6,710,153

Payroll and related taxes

                  253,837

                  294,273

Suppliers

               1,763,206

               2,077,763

Taxes payable

                  231,861

                  177,863

Borrowings and financing

               2,117,448

               3,094,761

Other payables

               1,021,724

                  976,654

Provision for tax, social security, labor and civil risks

                  108,607

                     88,839

 Non-current liabilities

             31,272,419

             30,093,872

Borrowings and financing

             28,323,570

             27,046,927

Deferred Income Tax and Social Contribution

               1,046,897

               1,146,699

Other payables

                  131,137

                  133,606

Provision for tax, social security, labor and civil risks

                  704,485

                  735,868

Other provisions

               1,066,330

               1,030,772

 Shareholders’ equity

               7,384,521

               7,042,965

Paid-in capital

               4,540,000

               4,540,000

Capital reserves

                             30

                             30

Acumulated Losses

             (1,301,961)

             (1,875,725)

Statutory reserve

               2,956,459

               3,137,243

Non-controlling interests

               1,189,993

               1,241,417

 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

             44,153,623

             43,846,990

 

 

For further information, please visit our website: www.csn.com.br/ri

14

 
 

 
 
 

 

 

 

CASH FLOW STATEMENT

CONSOLIDATED - Corporate Law (In Thousand of R$)

 

Unaudited

1Q17

Unaudited

2Q17

 Net cash generated by operating activities

(104,517)

(386,723)

 (Net Losses) / Net income attributable to controlling shareholders

85,630

(659,394)

 Loss for the period attributable to non-controlling interests

31,985

19,438

 Charges on borrowings and financing

670,722

616,247

 Depreciation, depletion and amortization

401,276

366,400

 Share of profits (losses) of investees

(21,105)

(39,393)

 Deferred income tax and social contribution

22,793

72,069

 Foreign exchange and monetary variations, net

(285,399)

431,813

 Write off fixed assets and intangible

9,834

(17,016)

 Environmental liabilities and Deactvation Provisions

2,518

(38,076)

 Fiscal, Social Security, Labor, Civil and Environmental Provisions

10,916

31,635

 Working Capital

(103,895)

(606,281)

 Accounts Receivable

87,436

(469,861)

 Trade Receivables – Related Parties

(21,349)

39,655

 Inventory

(312,169)

(136,027)

  Interest receive - Related Parties

1,727

(4,536)

 Judicial Deposits

(15,347)

(8,137)

 Suppliers

192,477

104,457

 Taxes and Contributions

(59,047)

(61,144)

 Others

22,377

(70,688)

 Others Payments and Receipts

(929,792)

(564,165)

 Interest Expenses

(929,792)

(564,165)

 Cash Flow from Investment Activities

(153,386)

(234,503)

 Fixed Assets/Intangible

(188,573)

(239,127)

 Derivative transactions

15,200

4,457

 Related parties loans

(15,188)

 

 Loans / Receive loans - related parties

9,472

2,644

 Short-term investment, net of redeemed amount

25,703

(2,477)

 Cash Flow from Financing Companies

(306,516)

(92,624)

 Borrowing amortizations - principal

(306,516)

(92,624)

 Borrowing costs

   

 Foreign Exchange Variation on Cash and Cash Equivalents

9,053

(10,607)

 Free Cash Flow

(555,366)

(724,457)

 

 

For further information, please visit our website: www.csn.com.br/ri

15

 

 
 
 

 

 

 

For further information, please visit our website: www.csn.com.br/ri

16

 

 


 
 
 

 

São Paulo, October 30, 2017

 

3Q17 Earnings Release

Unaudited 

 

 

Companhia Siderúrgica Nacional (CSN) (BM & FBOVESPA: CSNA3) (NYSE: SID) exceptionally discloses its preliminary and unaudited results for the first quarter of 2017 (1Q17) and is therefore subject to adjustments and modifications by independent auditors review. The information disclosed in Brazilian Reais and prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB); and also in accordance with accounting practices adopted in Brazil and fully convergent with international accounting standards, issued by the Accounting Pronouncements Committee (CPC) and referenced by the Brazilian Securities and Exchange Commission (CVM), pursuant to CVM Instruction 485 of 09/01/2010. The below text encompasses the Company's consolidated results for the third quarter of 2017 (3Q17) and comparisons are for the second quarter of 2017 (2Q17) and for the third quarter of 2016 (3Q16) without Metallic, unless otherwise specified. The Real/U.S. Dollar exchange rate was R$3.1674 on September 30, 2017 and R$3.3076 on June 30, 2017.

 

The financial information contained herein for the second quarter of 2017 is preliminary and unaudited , and is therefore subject to adjustments and modifications as a result of an independent auditors' review.

 

 

Operating and Financial Highlights

 

·          EBITDA totaled R$1,213 million , 35% up on 2Q17, accompanied by an EBITDA margin of 24%, 4.4 p.p. higher than in the same quarter of the previous year.

·          Net revenue stood at R$4,810 million in 3Q17, the highest output quarter since 2014.

·          Iron ore sales reached 7,9 million tonnes, 2% higher than in 2Q17.

·          The net debt/EBITDA ratio closed 3Q17 at 5.5x.

·          Steel lower spending with scheduled maintenance of LTQ2 and AF3.

·           Fall of R$ 662 million in working capital, with a focus on inventories reduction and a longer finance cycle.

Highlights

3Q16

2Q17

3Q17

Change

3Q17

x

2Q17

3Q17

x

3Q16

Steel Sales (thousand t)

1,171

1,174

1,301

11%

9%

   - Domestic Market

62%

56%

62%

6%

4%

   - Overseas Subsidiaries

34%

39%

33%

-6%

-6%

   - Exports

4%

5%

5%

0%

1%

Iron Ore Sales (thousand t)1

10,230

7,818

7,953

2%

-22%

   - Domestic Market

89%

17%

17%

0%

6%

   - Exports

89%

83%

83%

0%

-6%

Consolidated Results (R$ Million)

     

 

 

 

 

 

 

Net Revenue

4,469

4,311

4,810

12%

8%

Gross Profit

1,312

985

1,213

23%

-8%

Adjusted EBITDA

1,239

896

1,213

35%

-2%

Adjusted Net Debt

25,842

26,754

25,717

-4%

0%

Adjusted Cash Position

5,663

4,545

4,358

-4%

-23%

Net Debt / Adjusted EBITDA

7.4x

5.7x

5.5x

-0.2x

-1.9x

Adjusted EBITDA is calculated based on net income/loss, plus depreciation and amortization, income tax, net financial result, results from investees and other operating revenue (expenses), and includes the proportionate share of EBITDA of the jointly-owned subsidiaries MRS Logística and CBSI. It has also included the Company’s stakes of 100% in Congonhas Minérios, 37.27% in MRS and 50% in CBSI as of December 2015.

Adjusted Net Debt and Adjusted Cash Position include the stakes of 100% in Congonhas Minérios, 37.27% in MRS and 50% in CBS excluding Forfaiting and drawee risk operations.

 

 

For further information, please visit our website: www.csn.com.br/ri

 

    
 

 
 
 

 

 

 

3Q17
Earnings

 

 

 

CSN’s Consolidated Results

 

·          Net revenue totaled R$4,810 million in 3Q17, 12% up on 2Q17, due to higher steel product sales volume compared with the immediately previous quarter and the slight upturn in shipped volume in the mining segment, with an increase in ore prices.

 

·          COGS came to R$3,597 million in 3Q17, 8% higher than in the previous quarter, accompanying the increase in sales volume in the steel segment.

 

·          Gross profit totaled R$1,213 million, 23% higher on 2Q17, while the gross margin reached 25,2%, highlight with the strong results in the mining segment.

 

·          Selling, general and administrative expenses amounted to R$491 million in 3Q17, 17% less than in 2Q17, especially due to the lower share of iron ore CIF sales in the mix in the previous quarter.

 

·          Other operating income (expenses) was a net expense of R$98 million in 3Q17, in line with the previous quarter.

 

·          In 3Q17, the net financial result was negative by R$278 million, i) as a result of financial expenses of R$348 million, partial compensated by the financial revenue of R$71 million. The foreign exchange variation of the dollar-denominated debt was positive in R$ 473 million.

 

Financial Result (R$ million)

        3Q16

2Q17

3Q17

Financial Result - IFRS

     (744)

           (829)

           (278)

Financial Revenue

      139

               84

               71

Financial Expenses

     (884)

           (912)

           (348)

Financial Expenses (ex-exchange variation)

     (823)

           (683)

           (629)

Result with Exchange Variation

      (60)

           (229)

           280

Monetary and Exchange Variation

   (131)

           (461)

           473

Hedge Accounting

     68

             227

             (202)

Derivative Result

     3

                  5

                  10

Others

-

-

-

 

 

·          CSN’s equity result was a positive R$38 million in 3Q17, versus R$40 million in 2Q17.

 

Share of Profit (Loss) of Investees (R$ million)

3Q16

2Q17

3Q17

Change

3Q17

x

2Q17

3Q17

x

3Q16

MRS Logística

42

54

54

-

29%

CBSI

1

1

1

-

-

TLSA

(6)

(5)

(11)

133%

76%

Arvedi Metalfer BR

2

1

-

-

-

Eliminations

(13)

(12)

(6)

(47%)

(52%)

Unrealized Profit

1

-

-

-

 

Share of Profits (Losses) of Investees

          26

          39

         38

(3%)

45%

 

 

·           CSN recorded a third-quarter net income of R$256 million, versus net loss of R$640 million in 2Q17. In 3Q17 was reflected by a better operating margin in steel and mining, as well as financial results.

 

 

Adjusted EBITDA (R$ million)

3Q16

2Q17

3Q17

Change

3Q17

x

2Q17

3Q17

x

3Q16

Profit (Loss) for the Period

       (67)

      (640)

      256

-

-

(-) Depreciation

        311

       356

      344

(3%)

11%

(+)  Income Tax and Social Contribution

        123

       145

      128

           (12%)

            4%

(-) Net Financial Result

        744

   829

278

  (66%)

(63%)

EBITDA (CVM Instruction 527)

        1,118

       689

       1,006

46%

(10%)

(+) Other Operating Income/Expenses

        8

        99

       98

(1%)

-

(+) Share of Profit (Loss) of Investees

       (26)

       (39)

       (38)

(3%)

46%

(-) Proportionate EBITDA of Jointly-Owned Subsidiaries

       138

     148

       147

(1%)

 7%

Adjusted EBITDA

       1,232

        896

      1,213

35%

(2%)

 
 

For further information, please visit our website: www.csn.com.br/ri

  2
 
 

 
 
 

 

 

3Q17
Earnings

 

 

¹The Company discloses adjusted EBITDA excluding interests in investments and other operating income (expenses) in the belief that these items should not be considered when calculating recurring operating cash flow.

 

·          Adjusted EBITDA amounted to R$1,213 million in 3Q17, versus R$896 million in the previous quarter, 35% up, accompanied by an adjusted EBITDA margin of 24%, due to higher performance of iron and steel.

 

 

 

 

 

 

 

¹The adjusted EBITDA margin is calculated as the ratio between adjusted EBITDA and adjusted net revenue, considering the stakes of 100% in Congonhas Minérios, 37.27% in MRS and 50% in CBSI.

 

Debt

 

The adjusted amounts of EBITDA, debt and cash include the stakes of 100% in Congonhas Minérios, 37.27% in MRS and 50% in CBSI, as well as financial investments used as collateral for exchange operations on the BM&FBovespa. On June 30, 2017, consolidated net debt totaled R$26,754 million, while the net debt/EBITDA ratio, calculated based on LTM adjusted EBITDA, stood at 5.5x.

 

 

 

 

 

 

 

 

 

3

 

   

For further information, please visit our website: www.csn.com.br/ri

 
 

 
 
 

 

 

3Q17
Earnings

 

 

Foreign Exchange Exposure

 

The FX exposure of our consolidated balance sheet on September 30, 2017 was US$742 million, as shown in the table below.

 

The hedge accounting adopted by CSN correlates projected export inflows in dollars with part of the scheduled debt payments in the same currency. Therefore, the exchange variation of the dollar-denominated debt is temporarily booked under shareholders’ equity, being recorded in the income statement when dollar revenues from exports are received.

 

Foreign Exchange Exposure

IFRS

(US$ million)

6/30/2017

9/30/2017

Cash

               890

               846

Accounts Receivable

               404

               387

Total Assets

           1,296

           1,236

Borrowings and Financing

          (4,324)

          (4,329)

Suppliers

               (70)

               (37)

Other Liabilities

               (13)

               (5)

Total Liabilities

          (4,407)

          (4,370)

Foreign Exchange Exposure

          (3,110)

          (3,135)

Notional Amount of Derivatives Contracted, Net

            -  

            -  

Cash Flow Hedge Accounting

           1,421

           1,393

Net Foreign Exchange Exposure

          (1,689)

          (1,742)

Perpetual Bonds

           1,000

           1,000

Net Foreign Exchange Exposure excluding Perpetual Bonds

             (689)

             (742)

 

 

Capex

 

CSN invested R$293 million in 3Q17. The cumulative amount in 2017 was much lower than 2016..

 

 

Capex (R$ million)

3Q16

2Q17

3Q17

Steel

133

102

119

Mining

56

106

115

Cement

157

20

34

Logistics

36

11

19

Other

0

0

6

 Total Capex - IFRS

           382

           239

           293

 

Working Capital

 

Working capital invested in the Company’s business totaled R$2.935 million in 3Q17, R$662 million less than in 2Q17, chiefly due to the decrease in inventories and accounts receivable R$ 199 million and R$ 174 million respectively . On a same comparison basis, the average receivable period decreased by four days, while inventory turnover fell by nine days and the average payment period moved up by two days.

 

In order to calculate working capital, CSN adjusts its assets and liabilities as shown below:

 

For further information, please visit our website: www.csn.com.br/ri

  4
 
 

 
 
 

 

 

3Q17
Earnings

 

 

·          Accounts Receivable: Excludes Dividends Receivable, Advances to Employees and Other Credits.

·          Inventories: Includes Estimated Losses and excludes Spare Parts, which is not part of the cash conversion cycle, and will be subsequently booked under Fixed Assets when consumed.

·          Recoverable Taxes: Composed only by the Income (IRPJ) and Social Contribution (CSLL) Taxes amount included in Recoverable Taxes.

·          Taxes Payable: Composed of Taxes Payable under Current Liabilities plus Taxes in Installments.

·          Advances from Clients: Subaccount of Other Liabilities recorded under Current Liabilities.

·          Suppliers: Includes Forfaiting and Drawee Risk.

 

 

Working Capital (R$ million)

3Q16

2Q17

3Q17

 

Change

 

3Q17

x

2Q17

3Q17

x

3Q16

Assets

4,953

6,252

5,868

 

(383)

915

Accounts Receivable

1,789

2,300

2,127

 

(174)

338

Inventories

3,002

3,744

3,545

 

(199)

543

Recoverable Taxes

162

207

196

 

(11)

34

Liabilities

2,287

2,655

2,933

 

278

646

Suppliers

1,690

2,078

2,250

 

172

560

Payroll and Related Charges

287

294

296

 

2

10

Taxes Payable

248

183

279

 

96

31

Advances from Clients

63

100

108

 

9

45

Working Capital

2,666

3,597

2,935

 

(662)

269

 

 

 

 

 

 

 

 

 

 

 

Average Period (days)

3Q16

2Q17

3Q17

 

Change

 

3Q17

x

2Q17

3Q17

x

3Q16

Receivables

34

41

37

 

(4)

3

Supplier Payment

49

59

61

 

2

12

Inventories

87

106

97

 

(9)

10

Financial Cycle

72

88

73

 

(15)

1

 

 

Results by Segment

 

The Company maintains integrated operations in five business segments: Steel, Mining, Logistics, Cement and Energy.  The main assets and/or companies comprising each segment are presented below:

 

    

Notes: As of 2013, the Company ceased the proportional consolidation of its jointly-owned subsidiaries Namisa, MRS and CBSI. For the purpose of preparing and presenting the information by business segment, Management opted to maintain the proportional consolidation of its jointly-owned subsidiaries, in line with historical data. In the reconciliation of CSN’s consolidated results, these companies’ results are eliminated in the “Corporate Expenses/Elimination” column.

 

For further information, please visit our website: www.csn.com.br/ri

  5
 
 

 
 
 

 

 

3Q17
Earnings

 

³Since the end of 2015 results, after the combination of CSN’s mining assets (Casa de Pedra, Namisa and Tecar), the consolidated result have included all the information related to this new company.

 

 

 

 

 

 

 

 

Net Revenue by Segment  – 3Q17  (R$ million)

 

 

    

 

 

Adjusted EBITDA by Segment – 3Q17 (R$ million)

 

 
 

 


 

 

 

 

 

For further information, please visit our website: www.csn.com.br/ri

  6
 
 

 
 
 

 

 

3Q17
Earnings

 

 

 

        Logistics     Logistics           
  Results 3Q17     Steel     Mining   (Port)   (Railways)     Cement     Energy   Corporate/Eli    Consolidated  
  (R$ MM)               minations    
Net Revenue   3.399   1.204   60   364   142   103   (462)   4.810  
Domestic Market   2.133   218   60   364   142   103   (638)   2.382  
Foreign Market   1.265   986   -   -   -   -   176   2.427  
Cost of Goods Sold   (2.845)   (719)   (37)   (242)   (151)   (74)   471   (3.597)  
Gross Profit   553   486   23   122   (9)   29   8   1.213  
Selling, General and Administrative Expenses   (253)   (40)   (6)   (21)   (20)   (7)   (143)   (491)  
Depreciation   165   122   4   63   30   5   (45)   344  
Proportional EBITDA of Jointly Controlled Companies   -   -   -   -   -   -   147   147  
Adjusted EBITDA   465   568   21   164   1   27   (33)   1.213  

 

 

          Logistics     Logistics           
  Results 2Q17     Steel   Mining    (Port)   (Railways)   Cement    Energy     Corporate/Eli   Consolidated  
  (R$ MM)               minations    
Net Revenue   3.055   1.067   52   364   114   111   (452)   4.311  
Domestic Market   1.749   246   52   364   114   111   (674)   1.963  
Foreign Market   1.305   821   -   -   -   -   222   2.348  
Cost of Goods Sold   (2.628)   (742)   (38)   (244)   (126)   (71)   523   (3.326)  
Gross Profit   426   325   15   121   (13)   40   71   985  
Selling, General and Administrative Expenses   (271)   (42)   (7)   (23)   (20)   (7)   (222)   (592)  
Depreciation   172   124   4   65   33   6   (48)   356  
Proportional EBITDA of Jointly Controlled Companies   -   -   -   -   -   -   147   147  
Adjusted EBITDA   327   408   12   163   (0)   39   (53)   896  

 

 

Steel

 

According to the World Steel Association (WSA), global crude steel production totaled 1.1 billion tonnes until August 2017, 4.9% more than in the same period last year. According to the Brazilian Steel Institute – IABr, domestic crude steel production came to 22.5 million tonnes, 9.3% up. Apparent steel consumption grew by 4.5%, to 12.6 million tonnes, with domestic sales of 11 million tonnes and imports of 1.6 million tonnes. Exports totaled 9.8 million tonnes, 12.9% more than in the same period last year. According to INDA (the Brazilian Steel Distributors’ Association), in the first eight months, steel purchases by distributors declined by 1.9% year-on-year, totaling 1.9 million tonnes. Inventories stood at 897,500 tonnes at the end of August, 2.7% more than in the previous month, while inventory turnover fell to 3 months.

 

Automotive

According to ANFAVEA (the Auto Manufacturers’ Association), vehicle production totaled 1.9 million units in the first nine months of 2017, 27% up on the same period in 2016. In the same period, new light car, commercial vehicle, truck and bus licensing increased by 11% to 1.4 million units.

 

Construction

 

According to ABRAMAT (the Construction Material Manufacturers’ Association), sales of building materials fell by 6.1% in the year through August 2017 over the same period in 2016.

 

For further information, please visit our website: www.csn.com.br/ri

  7
 
 

 
 
 

 

 

3Q17
Earnings

 

 

Home Appliances

 

According to IBGE (the Brazilian Institute of Geography and Statistics), home appliance production in the year through August increased by 10.1% over the same period last year.

 

Results from CSN’s Steel Operation

 

 

· Total sales came to 1,301 tonnes in 3Q17, 11% higher than 2Q17, broken down as follows: 62% from the domestic market, 32% from our subsidiaries abroad and 6% from exports.

· In 3Q17, CSN’s domestic steel sales came to 802,000 tonnes, 23% higher than in 2Q17. Of this total, 730,000 tonnes corresponded to flat steel and 72,000 tonnes to long steel.
· Foreign steel sales amounted to 499,000 tonnes in 3Q17, 4% down on the previous three months. Of this total, exports reached 74,000 tonnes, the overseas subsidiaries sold 425,000 tonnes, 155,000 of which by LLC, 177,000 by SWT and 92,000 by Lusosider.
· In the third quarter, CSN maintained its high share of coated products as a percentage of total sales volume, following the strategy of adding more value to its product mix. Sales of coated products such as galvanized
items and tin plate accounted for 56% of flat steel sales, considering all the markets in which the Company operates. The
foreign market  was one of the quarter's highlights, with the share of coated products remaining high, at 88% in 3Q17.
· Net revenue totaled R$3,399 million in 3Q17, 11% up on 2Q17. Net average revenue per tonne stood at R$2,519,in line with 2Q17.

 

 

For further information, please visit our website: www.csn.com.br/ri

  8
 
 

 
 
 

 

 

3Q17
Earnings

 

 

 

·          The slab production reached 1.1 million tonnes in 3Q17, in line with 2Q17. Flat rolled steel production totaled 903,000 tonnes.  

 

Flat Steel  Production (Parent Company)

3Q16

2Q17

3Q17

Change

(thousand tonnes)

3Q17

x

2Q17

3Q17

x

3Q16

Total Slabs (President Vargas Plant + Third Parties)

857

1,108

1,069

(4%)

25%

Slab Production

738

1,070

1,065

0%

44%

Third-Party Slabs

119

38

4

-

(96%)

Total Rolled Flat Steel

835

943

903

(4%)

8%

Total Long Products

90

56

50

(10%)

(44%)

 

·          COGS moved up by 8% over the previous quarter, to R$2,845 million, chiefly due the higher sale volume.

 

·           The production cost amounted to R$1,906 million in 3Q17, 9% more than in 2Q17, particularly due to the better prices in purchase of raw material, especially to ore price, increased own consumption of coke, in addition to the end of maintenance of the blast furnace #3 and the hot strip mill.

 

·          The slab production cost came to R$1,286/t, 9% down on 2Q’s R$1,414.

 

 

·          Adjusted EBITDA amounted to R$465 million in 3Q17, 42% up on the R$327 million recorded in 2Q17, accompanied by a 3 p.p. incline the quarter before. Adjusted EBITDA margin increased to 13.7%, 3p.p. higher than in the previous quarter.

 

 

 

 

 

 

Mining

 

After the sharp drop in prices in 2Q17, the closure of induction furnaces in China was a result of a decrease in steel supply, raising the utilization levels of the plants’ installed capacity and margins. In this context, the commodity’s price averaged US$70.90/dmt (Platts, Fe62%, N. China) in 3Q17, 13% up on the previous quarter.

 

 

For further information, please visit our website: www.csn.com.br/ri

  9
 
 

 
 
 

 

 

3Q17
Earnings

 

 

In 3Q17, seaborne freight charges continued positively impacted by higher export volumes and, additionally, a recovery in oil prices. In this scenario, maritime freight costs on Route CI-C3 (Tubarão-Qingdao) averaged US$15.13/t in 3Q17, 12% up on 2Q17.

 

Results from CSN’s Mining Operations

 

·          In 3Q17, iron ore production totaled 7.7 million tonnes, 3% down on 2Q17, 1.4 million tonnes volume was purchased by third parties.

 

·          Iron ore sales  reached 7.9 million tonnes in 3Q17, 2% up on 2Q17. In the quarter, 1.3 million tonnes from CSN Mineração were sold to CSN’s Presidente Vargas Plant.

 

 

Production Volume and Mining Sales   3Q16   2Q17   3Q17     Change
(thousand t)         3Q17 x 2Q17   3Q17 x 3Q16  
Iron Ore Production¹   8.553   7.948   7.738   -3%   -10%  
Third Parties Purchase   797   167   1.419   752%   78%  
Total Production + Purchase   9.350   8.114   9.157   13%   -2%  
UPV Sale   1.114   1.307   1.321   1%   19%  
Third Parties Sales Volume   9.116   6.511   6.632   2%   -27%  
Total Sales   10.230   7.818   7.953   2%   -22%  

 

 

·         Net revenue from mining operations totaled R$1,204 million, 13% higher than in 2Q17. CFR+ FOB unit revenue stood at US$55,7/t, 13% more than in 2Q17, while the iron ore price index (Platts, 62% Fe, N. China) also fell by 13% in the same period .

 

·         Mining COGS came to R$719 million in 3Q17, 3% lower than in 2Q17.

 

·     Adjusted EBITDA totaled R$568 million in 3Q17, 39% up on 2Q17, with an adjusted EBITDA margin of 47%, 8.9 p.p. more than in 2Q17.


 

 

 

The table above shows the price of the two modalities, CFR+FOB.

 

 

Logistics

Railway Logistics: Net revenue stood at R$364 million in 3Q17, generating EBITDA of R$164 million, accompanied by an EBITDA margin of 45%.

 

Port Logistics : Sepetiba Tecon handled nearly 51,000 containers, in addition to  250,000 tonnes of steel products. Net revenue totaled R$60 million, generating EBITDA of R$21 million, accompanied by an EBITDA margin of 35%.

 

 

 

For further information, please visit our website: www.csn.com.br/ri

  10
 
 

 
 
 

 

 

3Q17
Earnings

 

 

           Change  
Sepetiba TECON Highlights   3Q16   2Q17   3Q17     3Q17 x 2Q17   3Q17 x 3Q16  
Containers Volume (thousand units)   34   39   51   31%   49%  
Steel Products Volume (thousand t)   127   212   250   18%   97%  
General Cargo Volume (thousand t)   5   1   0   -61%   -95%  

 

 

 

Cement

 

Preliminary figures from SNIC ( the Cement Industry Association ) indicate domestic cement sales of 40.5 million tonnes from January to September 2017, 7.4% less than in the same period the year before.

 

 

Results from CSN’s Cement Operations

 

In 3Q17, cement sales totaled 982,000 tonnes, 17% up on 2Q17, while net revenue amounted to R$142 million.

 

 

Cement Highlights             Change  

(thousand t)

3Q16   2Q17   3Q17     3Q17 x 2Q17   3Q17 x 3Q16  
Total Production 859,78128 840,752 982 17 %   14 %  
Total Sales 849,95745 830,625 998 20 %   17 %  

 

 

Energy

 

According to the Energy Research Company (EPE), the trend of stability in the energy market continued in August, with consumption edging down 0.1% year-over-year, to 37,583 GWh. In the year through August, consumption remained in line with the same period last year. Considering the Brazilian regions, the South grew by 4.0% and the North by 3.4%, while the Northeast fell by 2.1%, the Southeast by 1.3% and the Midwest by 0.1%. The captive market of the distribution companies fell by 6.3% in the month, while free consumption increased by 15.3%.

 

Results from CSN’s Energy Operations

 

In 3Q17, net revenue from energy operations totaled R$103 million, EBITDA stood at R$27 million and EBITDA margin was 26.5%.

 

 

 

 

For further information, please visit our website: www.csn.com.br/ri

11

 
 

 
 
 

 

 

 

3Q17
Earnings

 

 

Capital Market

 

CSN’s shares appreciated by 32% in 3Q17, while the IBOVESPA moved up by 17%. Daily traded volume on the BM&FBovespa averaged R$72.6 million. On the New York Stock Exchange (NYSE), CSN’s American Depositary Receipts (ADRs) appreciated by 17%, versus the Dow Jones’ 4% appreciation. On the NYSE, daily traded volume of CSN’s ADRs averaged US$7.4 million.

 

3Q17

Number of shares in thousands

1,387,524

Market Cap:

 

Closing price (R$/share)

9.61

Closing price (US$/ADR)

                     2.96

Market cap (R$ million)

13,334

Market cap (US$ million)

                   4,107

Total return including dividends and interest on equity

 

CSNA3

32%

SID

32%

Ibovespa

17%

Dow Jones

4%

Volume

 

Daily average (thousand shares)

8,311

Daily average (R$ thousand)

72,650

Daily average (thousand ADRs)

2,684

Daily average (US$ thousand)

7,405

Source: Bloomberg

 

 

Webcast - 3Q17 Earnings Presentation

Investor Relations Team

Conference Call in Portuguese with Simultaneous Translation into English

October 31, 2017 – Tuesday

12:30 p.m. (US EDT)

02:30 p.m. (Brasília time)

Phone: +1 (516) 300-1066

Code: CSN

Replay phone: +55 (11) 3127-4999

Replay code: 86131824

Conference ID: CSN

Webcast: www.csn.com.br/ri

 

Executive Officer David Salama

Leo Shinohara ( leonardo.shinohara@csn.com.br )

Jose Triques ( jose.triques@csn.com.br )

Carla Fernandes ( carla.fernandes@csn.com.br )

Bruno Souza ( bruno.souza@csn.com.br )

 

 

 

Certain of the statements contained herein are forward-looking statements, which express or imply results, performance or events that are expected in the future. These include future results that may be implied by historical results and the statements under ‘Outlook’. Actual results, performance or events may differ materially from those expressed or implied by the forward-looking statements as a result of several factors, such as the general and economic conditions in Brazil and other countries, interest rate and exchange rate levels, protectionist measures in the U.S., Brazil and other countries, changes in laws and regulations and general competitive factors (on a global, regional or national basis).

 

 

 

For further information, please visit our website: www.csn.com.br/ri

  12
 
 

 
 
 

 

 

3Q17
Earnings

 

INCOME STATEMENT

CONSOLIDATED – Corporate Law (In thousand of R$)

 

3Q16

Unaudited 2Q17

Unaudited 3Q17

 Net Revenues

             4,469,240

             4,310,609

             4,809,671

 Domestic Market

             2,100,371

             1,962,864

             2,382,265

 Foreign Market

             2,368,869

             2,347,745

             2,427,406

 Cost of Goods Sold (COGS)

            (3,157,057)

            (3,325,893)

            (3,596,936)

 COGS, excluding depreciation

            (2,851,368)

            (2,977,952)

            (3,260,372)

 Depreciation allocated to COGS

               (305,689)

               (347,941)

               (336,564)

 Gross Profit

             1,312,183

                 984,716

             1,212,735

 Gross Margin (%)

29%

23%

25%

 Selling expenses

               (403,112)

               (477,063)

               (412,345)

 General and administrative expenses

               (114,429)

               (106,801)

                 (70,646)

 Depreciation allocated to SG&A

                    (5,662)

                    (7,829)

                    (7,727)

 Other operation income (expense), net

                    (7,723)

                 (99,025)

                 (97,824)

 Share of profits (losses) of investees

                   26,117

                   39,393

                   38,002

 Operational Income before Financial Results

                 807,374

                 333,391

                 662,195

 Net Financial Results

               (744,345)

               (828,619)

               (277,797)

 Profit before finance income (costs) and taxes

                   63,029

               (495,228)

                 384,398

 Income Tax and Social Contribution

               (122,796)

               (144,728)

               (128,214)

 Continued operations, net

                 (59,767)

               (639,956)

                 256,184

 Discontinued Operations, Net

                    (6,984)

                            -  

                                

 Profit / Loss before period

                 (66,751)

               (639,956)

                 256,184

 

 

 

For further information, please visit our website: www.csn.com.br/ri

  13
 
 

 
 
 

 

 

 

3Q17
Earnings

 

 

 

BALANCE SHEET

Company Corporate Law (In Thousand of R$)

 

Consolidated

 

12/31/2016

Unaudited 09/31/2017

 Current assets

                         12,444,918

                         11,653,843

Cash and cash equivalents

                            5,631,553

                            4,138,770

Trade receivables

                            1,997,216

                            2,240,375

Inventories

                            3,964,136

                            4,246,458

Other current assets

                               852,013

                            1,028,240

 Non-current assets

                         31,708,705

                         32,219,870

Long-term receivables

                            1,745,971

                            1,778,197

Investments measured at amortized cost

                            4,568,451

                            5,293,244

Property, plant and equipment

                         18,135,879

                         17,875,819

Intangible assets

                            7,258,404

                            7,272,610

 Total assets

                         44,153,623

                         43,873,713

 Current liabilities

                            5,496,683

                            7,848,924

Payroll and related taxes

                               253,837

                               296,167

Suppliers

                            1,763,206

                            2,249,151

Taxes payable

                               231,861

                               269,168

Borrowings and financing

                            2,117,448

                            3,983,810

Other payables

                            1,021,724

                               950,560

Provision for tax, social security, labor and civil risks

                               108,607

                               100,068

 Non-current liabilities

                         31,272,419

                         28,058,141

Borrowings and financing

                         28,323,570

                         25,020,128

Deferred Income Tax and Social Contribution

                            1,046,897

                            1,167,974

Other payables

                               131,137

                               129,811

Provision for tax, social security, labor and civil risks

                               704,485

                               718,592

Other provisions

                            1,066,330

                            1,021,636

 Shareholders’ equity

                            7,384,521

                            7,966,648

Paid-in capital

                            4,540,000

                            4,540,000

Capital reserves

                                         30

                                         30

Acumulated Losses

                          (1,301,961)

                          (1,649,259)

Statutory reserve

                            2,956,459

                            3,804,741

Non-controlling interests

                            1,189,993

                            1,271,136

 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

                         44,153,623

                         43,873,713

 

 

 

For further information, please visit our website: www.csn.com.br/ri

  14
 
 

 
 
 

 

 

3Q17
Earnings

 

 

 

CASH FLOW STATEMENT

CONSOLIDATED - Corporate Law (In Thousand of R$)

 

Unaudited          2Q17

Unaudited          3Q17

 Net cash generated by operating activities

              (386,723)

               585,411

 (Net Losses) / Net income attributable to controlling shareholders

              (659,394)

               226,466

 Loss for the period attributable to non-controlling interests

                  19,438

                  29,718

 Charges on borrowings and financing

               616,247

               561,341

 Depreciation, depletion and amortization

               366,400

               355,400

 Share of profits (losses) of investees

                (39,393)

                (38,002)

 Deferred income tax and social contribution

                  72,069

                  37,309

 Foreign exchange and monetary variations, net

               431,813

              (414,301)

 Write off fixed assets and intangible

                (17,016)

                    4,484

 Environmental liabilities and Deactvation Provisions

                (38,076)

                  (9,136)

 Fiscal, Social Security, Labor, Civil and Environmental Provisions

                  31,635

                (46,068)

 Working Capital

              (606,281)

               502,326

 Accounts Receivable

              (469,861)

               163,272

 Trade Receivables – Related Parties

                  39,655

                  (7,165)

 Inventory

              (136,027)

               184,935

 Interest receive - Related Parties

                  (4,536)

                  (6,748)

 Judicial Deposits

                  (8,137)

                  (9,323)

 Suppliers

               104,457

               183,578

 Taxes and Contributions

                (61,144)

                  41,197

 Others

                (70,688)

                (47,420)

 Others Payments and Receipts

              (564,165)

              (624,126)

 Interest Expenses

              (564,165)

              (624,126)

 Cash Flow from Investment Activities

              (234,503)

              (297,953)

 Fixed Assets/Intangible

              (239,127)

              (288,498)

 Derivative transactions

                    4,457

                  10,717

 Loans / Receive loans - related parties

                    2,644

                              

 Short-term investment, net of redeemed amount

                  (2,477)

                (20,172)

 Cash Flow from Financing Companies

                (92,624)

              (500,336)

 Borrowings and financing raised, net of transaction costs

                              

               171,000

 Borrowing amortizations - principal

                (92,624)

              (671,336)

 Foreign Exchange Variation on Cash and Cash Equivalents

            (10,607)

              2,971

 Free Cash Flow

          (724,457)

          (209,907)

 

 

For further information, please visit our website: www.csn.com.br/ri

  15
 
 

 
 
    

 

 

3Q17
Earnings

 

 

SALES VOLUME CONSOLIDATED (thousand tonnes)
 
    3Q16   2Q17   3Q17   Change
          3Q17 x 2Q17     3Q17 x 3Q16  
Flat Steel     682     592     730     138     48  
Slabs     -     -     1     1     1  
Hot Rolled     233     216     267     52     34  
Cold Rolled     129     117     155     38     27  
Galvanized     218     191     234     43     15  
Tin Plates     102     68     73     4     (29)  
Long Steel UPV     49     60     72     12     24  
DOMESTIC MARKET     730     652     802     150     72  
 
    3Q16     2Q17     3Q17     3Q17 x 2Q17     3Q17 x 3Q16  
Flat Steel     282     316     321     5     39  
Hot Rolled     16     14     16     1     (0)  
Cold Rolled     19     24     22     (2)     3  
Galvanized     212     232     233     1     20  
Tin Plates     35     46     51     5     16  
Long Steel (profiles)     159     205     177     (27)     18  
FOREIGN MARKET     441     521     499     (23)     58  
 
    3Q16      2Q17      3Q17      3Q17 x 2Q17     3Q17 x 3Q16  
Flat Steel     964     909     1.051     142     87  
Slabs     -     -     1     1     1  
Hot Rolled     249     230     283     53     34  
Cold Rolled     148     141     177     36     29  
Galvanized     431     423     466     43     35  
Tin Plates     136     115     124     9     (12)  
Long Steel UPV     49     60     72     12     23  
Long Steel (profiles)     159     205     177     (28)     18  
TOTAL MARKET     1.172     1.174     1.301     127     129  
 

 

 

For further information, please visit our website: www.csn.com.br/ri

  16
 
 

SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: October 30, 2017
 
COMPANHIA SIDERÚRGICA NACIONAL
By:
/ S / Benjamin Steinbruch

 
Benjamin Steinbruch
Chief Executive Officer

 

 
By:
/ S / David Moise Salama

 
David Moise Salama
Executive Officer

 
 

 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.


 
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